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(Update) Hargreaves Lansdown has attempted to explain why it is introducing a new monthly platform fee on all tracker funds - and some others - on its Vantage platform.

Platform fee is not anti-tracker

Hargreaves Lansdown customers have complained that the decision to levy a £1-£2 monthly fee on affected funds from 31 December will make it more expensive to invest in popular, low-cost tracker funds such as the HSBC FTSE All Share Index fund.

However, Mark Dampier, head of research at the discount broker, denied the accusation from some customers that the move was 'anti-tracker'. He said Hargreaves had seen an explosion of investor interest in tracker funds - both exchange traded funds (ETFs) and passively run unit trusts - in the past three years and that it would use the extra money raised from the platform fee to extend its range of such funds on Vantage.

Dampier added that platform fee was in line with a recent change of policy by the Financial Services Authority. Over the summer the regulator announced it was minded to ban investment platforms, such as Hargreaves Lansdown, from receiving rebates from fund managers.

More fees could follow

Traditionally, actively run unit trusts - whose managers attempt to pick the best stocks - have carried an annual charge of between 1% and 1.5%. Platforms such as Hargreaves have taken a kickback, or rebate, of some of this charge, giving its customers the impression that they were getting access to the funds platform for nothing.

However, tracker funds - which eschew stock picking in favour of passively following a stock market index, such as the FTSE All Share, by buying all the shares listed on that index - have always thrown a spanner in the works. These funds carry a much lower annual management charge, typically around 0.5%, which leaves no room for the rebate to Hargreaves.

The new monthly platform fee will apply to all funds (mostly, but not exclusively, trackers) where Hargreaves currently does not receive its cut of the annual management charge from fund managers.

Dampier said Hargreaves was the first platform to respond to the FSA's policy and suggested explicit fees like this could become more prevalent on Vantage once the regulator's ban on commission and rebates took effect at the end of next year.

'If we're going to go to a pure fee charging business then there will be more of this,' he said.

Confusion over who is affected

Ben Lundie, head of Vantage development, sought to counter the impression that the cost of investing in tracker funds through Hargreaves, would go up.

Lundie said that Hargreaves already applied a 0.5% annual levy on top of the fund manager annual management charge on 130 funds where it did not receive a rebate. This was in line with the 0.5% annual charge appplied to ETFs and investment trusts and shares in its three main accounts (Sipp, ISA and fund account). These charges are capped at £45 in the ISA and £200 for the Sipp.

The only change, said Lundie, was that this additional annual charge on funds was being replaced by the monthly platform fee.

'However, the service required to buy, hold and administer these funds remains the same as for other funds. Investors do not expect to compromise on service, functionality, administration and secure custody of their funds.’

So why doesn't HL charge all investors a flat fee to represent the service it provides and negotiate rebates with all external managers where it doesn't get a cut of the annual charge?

"Hargreaves Lansdown says the fee will apply to less than 3% of the funds on its Vantage service and that the remaining unit trusts (or open-ended investment companies) will remain free to hold."

They're only free in the same way as bank advice is free, i.e. paid for out of commission. Hargreaves Lansdown have largely fallen behind in the run-up to RDR, with other companies already offering full rebates of the initial and trail commission in exchange for a one-off fee. The HSBC trackers were one of their last good deals, now they're more expensive than their rivals for all but the smallest portfolios, and even then only where those portfolios are entirely made up of managed funds.

I suspect this move will lose them a lot of business that they could otherwise have kept by setting a single percentage based portfolio charge and accessing institutional units for their clients (i.e. no trail commission and no hidden platform commission either).

I suspect there will be plenty more of this to come as the unbundling begins to result in people realising nothing is given for free - be it advice, ongoing service or, for that matter, the IT required to run fund platforms.

I suspect that those who have perpetuated the myth that such services are free are those most likely to feel the wrath of disgruntled clients!

Why people use H.L. is beyond comprehension. Discount brokers such as iii charge peanuts (£10 per trade for instance) and give a great service. Why would you wish to pay top rate commission to the likes of HL for little or no extra services. Financial service charges are becoming more transparent, as is the methods by which certain brokers have made fabulous profits over the years (IMO).

Low cost tracker funds have proven time and time again to outperform managed funds. I have just set up for my children regular savings plans to help them save towards a property. I am now faced with paying £2 charges on each £50 invested. I only went with HL as I hoped that eventually they would invest funds of their own and would have a ready made platform for their activities. Will be writing to HL and no doubt will arrange something with charges of less than 4% WITH ANOTHER COMPANY. HL you are shooting youself in the foot.

Well I am in the process of moving my SIPP from HL, the mgmt fees are too high and service is average at best. I have been with them for 15+ years and when they thought I was not clear as to the benefits of their SIPP, I made it clear that cost and service to me was the important factor (seems they think they can carry on as normal without anyone noticing the competition). What is that poor loyalty bonus all about as well???

I think this is a total rip off by H-L. They charge £200 per annum to run a SIPP, £45 to run an ISA PLUS all the other commission they receive from funds. I think everyone should look at Alliance Trust. I am contemplating moving all of my accounts + those of my wife and daughter away from H-L if this decision of charging £2 per month for index trackers is not reversed.

I find this outrageous and I am considering moving my account to another SIPP provider and have expressed this to Hargreaves Lansdown. They will not only lose my account but my husband's and my daughter's as well. At a time when we are having to cope with our assets being nearly wiped out by the recklessness of those in higher positions in financial intitutions to think very carefully about their continuous exploitation of customers who are always having to pay the price for their blunders!

You could always use your loyalty bonus rebates from your actively managed funds to pay for your tracker fee (if you must have a passive fund).Personally,I prefer actively managed funds and so this thread is a rather tedious issue.

I must admit that my initial response was to feel outraged at the new platform fee and immediately set about looking for alternatives. What allowed me to get a better perspective on this, was when I reviewed my current portfolio properly and saw that my trackers would still cost me less (as a percentage) than anything else. My average TER is 1.33% without the platform fee and will be 1.41% after it's introduced (an increas of 0.08%) - though the percentage will lower as I invest more, as the platform fee is "capped" at £24. If you have more than £4,800 invested in a tracker and are paying their 0.5% fee, the cost will actually go down!

I do have a problem with my wifes ISA, as this has a very small investment in both the HSBC 100 and 250 funds, so will workout at a fee of 8.61%!!! I have no option but to rethink that investment and will have to move to another fund or transfer.

I'm sure that the management team at HL will review this new fee and come up with a better proposal e.g. a 0.5% fee, capped at £24 would seem like a fairer approach. They are going to lose smaller investors and fail to attract "beginners", if they don't.

Why is it everyone thinks they deserve something for nothing? The one thing HL know how to do is arithmetic, so do you not think HL has thought through all these issues?

If you honestly believe you can save money elsewhere, you should move. I have quite a lot with HL, and would definitely move if I thought I was being ripped off, but I don't; yet.

I think The Pensioner has it right. I suspect HL is leading the way and all brokers will agree that this is the best way for them, thus delivering 'consumer consistency'. Let's have the discussion in a year's time and see if other brokers are doing anything radically different to HL.

Ian Hawkes: I pay H-L a capped £200 for my SIPP. I have lots of investments (diversity) and only a small % of managed funds. If it was much larger it would still cost me £200

Anonymous 1: I transferred my SIPP from Standard Life where every thing seemed to incur a fee and I was limited to 8 or 10 investments TOTAL (I forget which). Now I have over 30 investments and the list of possible funds is vast.

Anonymous 3: H-L charge £5.95!

The courtesy, helpfulness and efficiency of H-L on the phone surpass any other British company I can think of in any field and I use their website every day without any difficulty.

MysteryX: I have followed your advice and Alliance Trust fees look pretty similar.

ShareCrazy: I think you are suffering from ‘the grass is greener’ syndrome

To Gavin Lumsden: Quoting £432 sounds expensive, but this man holds 18 trackers so not so surprising.

H-L provide a platform for investors who want to do the investing themselves. For this they are very convenient. Also their website has lots of balanced advice (the best sort!) My guess the reason that tracker funds do relatively well is that some fund managers are so bad. Surely the best approach is to look at H-L’s comprehensive list of managed funds and pick out a good one. The data is there. And if it starts doing badly move your money (for free!) to a better one. What could be easier!

I can't believe H-L....they don't appear to listen......how come we keep receiving mail about lower commission rates when in fact they have increased.........it took me 4 years pleading for limit orders....now they are not interested in Alternative Investments in SIPPS for customers....I think my wife and I will be changing our Accounts together with friends before long..(after 12 yrs)

I am pleased to read that I am not the only one wgo has complained to HL. Its bully boy tactics. They are forcing us from investing in trackers and moving into funds where they make more money. I had an assortment of trackers across a number of accounts and the fees would be ridiculous now. Today I have started consolidating and switching my trackers ,

i am really surprised at HL. Until now I have had a great respect for them.

I doubt HL will be too worried by tracker holders leaving the platform, it's a commercial service and they can't make much if anything from providing all the IT etc that enables the service to work. Anyone wanting low cost trackers can get them for free (almost) by going direct to L&G etc, beats me why they expect others to subsidise them on the HL platform.

Lundie of HL is being disingenuous - the platform fee does not count to the £200 SIPP cap. So most users of trackers will see a substantial increase in fees. The best bet (aside from moving) looks to be using the equivalent ETFs from HSBC. Accept the inevitable commision but buy in big chunks and keep the holding then provided you are already at the £200 cap there should be no further increase. I suppose we are starting to learn who pays for the barrage of letters and doubtful advice. Overall this really undermines trust in HL to play straight.

Thanks to George Benson for bring HL's platform charge to everyone's attention. I for one was ignorant. I have HSBC Trackers but have not been told about the changes by HL. Its this sort of high handed behaviour that puts people's back up, even if in the end the fee may possibly be justified.

I am a fan of HL as a service, as having intelligent and knowledgeable human beings at the end of the phone line and at being efficient.

But they have made a mess of announcing this. They buried the announcement on p17 of Investment Times after a mention in the covering letter and explained it very poorly, so that I had to read and re-read it to to find out if it affected me - it doesn't (I think),

In the tabulation of individual funds and charges and loyalty bonuses the extra charge is shown as a footnote to the column headed 'Loyalty Bonus'. All-in-all a muddle and a suggestion of something to hide.

I don't expect to get all this service for nothing but it is a pity to see HL going down the route of the banks and utility companies in making their charges so complex and baffling that the consumer gives up trying to understand what is going on but suspects that they are being led up the garden path.

What has not been explained is the reason for the switch from a comprehensible 0.5% charge to this involved system . That is what is suggesting to so many people that there is more to the switch than meets the eye.

I am a small investor I just opened an ISA which contains 7 HSBC trackers I was about to add HSBC UK gilt index which HL keep well hidden, but 2% charges for a monthly £50 investment in a a gilt fund is a total joke! I am a novice investor but I'm not daft see you later HL. The rest of the family are joining me.

It does rather seem that the investors HL are going to lose are those with small portfolios of tracker funds who expect a free service! They are no doubt the same disgruntled brigade who last week held HL responsible for the poor performance of their own investment decisions. I feel sure that HL management know exactly the profile of client investor they are going to lose, and will sleep easy in their beds with the knowledge!

Sinic...is right HL will have thought it through and will probably be delighted to lose the small investors who are the ones who are moaning the most. In my experience they provide the most problems and expect everything for nothing...post RDR they will have nowhere to go and can thank the FSA for it

HL does not have a monopoly on the market. If you are unhappy, vote with your feet. I can't stand all this whinging. A business can introduce whatever terms it likes and I can guarantee the decision makers have a better idea of what is good for them than the low level tracker holders!

It must be taking an inordinate amount of time for people to plough through the HL site to identify funds with charges. If you are serious about losing money, compare the cost of your time Vs what extra fees you will be charged by HL (and I would suggest many complaining here don't hold affected funds!). By the way, I am not an 'agent' of HL. I will pay a fair price for great customer service. Just think on everyone who believes other brokers can continue to provide services at no charge ...how and why would they?

Of course Hargreaves will try and defend their actions just as Killik & Co defended their recent 1000% increase in the cost of paying from my pension once per annum. I also found out they were calculating incorrectly, weighed in their favour surprisingly and so they had to refund me.

They also charge me for two accounts as some of my money is protected rights, all the others I have contacted since dont. so if anyone thinks of moving to Killik from HL I suggest you do more groundwork.

I did contact HL once about depositing money, what a joke, talk about having your cake and eat it so I kept well clear of them. They receive all the interest and pay you the depositore some paltry percentage

Im moving from Killik in the new year when my deposit matures. I cant get out fast enough, never ever will I use them again. I consulted the Financial Ombudsman, nice people but a bit toothless really, awarded me £200 for Killiks lethargy in replying to me about the dreadfully poor and vague statements they sent me.

Tthe FSA is closing down isnt it? Anyway they dont deal directly with the individual and I guess they are busy so what real protection do we have with these companies doing a poor job....very little in reality

There are many more like HL and Killik and the Industry needs a radical shake up and disciplines enforced as they are not now. These companies dont offer value for money and seem focussed like many, in extracting as much as they possiblly can without giving in return.. whats new I suppose

I dont know what Mr Gardiner does, or did for a living, but whatever it was no doubt he provided his services for little or no cost and if he didnt perhaps he could stop bleating about the low cost service he seems to enjoy. If your clever enough to invest your own money successfully? then surely its not rocket science finding a no thrills low cost servicer?

Ana, I suspect we are just realists in fact. No one expects a free service in any other walk of life. I suspect the furore around this owes much to the recent demonisation of the industry by the press among others.

Ana, In my case I have no relationship other than that of client and very modest shareholder, and a satisfied one at that. However unlike the whingers on this thread I take credit for when I get my own decisions right, responsibility for when I get them wrong, and I don't expect a service provider to provide a service for nothing or at a loss.

This newly-launched brokerage service offers the usual execution-only service now associated with online dealing and is pledged to breaking the exorbitant fees structure that has grown up around our brokerage services, HL being a prime example.

Now of course, bwanakuba, you are welcome to go on thinking you've got a good deal with HL...

I would like to know why is it that the realists are the ones defending HL and the complainants are out of touch with reality. It would be more sensible and fairer if HL simply phased out such funds which it feels are unprofitable for new customers and let the old customers who hold index trackers to keep them and pay a flat rate. I have been helping my two daughters to begin building a pension for their future and it will make no sense for them to carry on with these funds under such circumstances, given the fact that they hold a very small kitty at present. We followed advice from members of our family who work in the industry and suggested what in the long term could be a good investment overall. Not anymore!

No more to add really...I still challenge Citywire to investigate HL properly....Clear charging please and an improved cash interest rate.HL v new model advice...which is best? But hey, you boys love HL.

If you're paying the £200 capped, then presumably you aren't holding any of the affected investments. If you were, you might be more sympathetic to those affected (which I am not, in case anyone's wondering, I recently left HL for a cheaper broker), who are in some cases now facing total fees on trackers in excess of fees on the most expensive managed funds.

In any case, my point was not in relation to SIPP charging, which is another matter entirely, but rather the fact that HL are no longer the cheapest in any of the areas they were once market leading in. For managed funds, they continue to retain some of the trail commission in spite of numerous rivals rebating more (or even all) of that commission. For tracker funds, they now charge either 0.5% with a cap or £2 per month without a cap, seemingly arbitrarily, which has a huge effect on their use as part of a portfolio's core. For other investments (ETFs, shares, ITs, etc), they charge a percentage based holding fee where many other brokers charge solely on transactions (i.e. no charge while holding them).

In short, my comment was that they are no longer the cheapest supplier in any area, therefore they have lost their competitive edge. On top of that, the new charges aren't even consistent with their previous method of offsetting the cost of administration on trackers, which was to levy a percentage fee with a cap.

I feel I should belatedly answer your comment to me, by apologising for putting your name right next to my heading of ‘nonsensical comments’. On re-reading I see that your comments were quite sensible but my reason for commenting in the first place was that the general tone of the various contributors was so different from my experience of H-L. I do not dispute that they are no longer as cheap as some but they have always been extraordinarily polite and helpful on phone and email even when I have asked some dumb questions and to one of the contributors who made certain allegations I have no vested interest in making my comments. (You’d think that by now H-L would have waived my fees, but no such luck.) When I first changed to H-L several years ago they were so much cheaper and more flexible and with a much better and more helpful web site than the large well known company a financial advisor had lodged me with that I was astonished to read such aggressive comments on this discussion.

You are right I don’t have any of the trackers; well, I have one Deutsche Bank 'db x-trackers’ ETF which doesn’t pay me anything, just goes up and down in value, and I don’t think I am being charged anything extra for that!

I can't say the HL platform would be my personal choice, but these sums are PEANUTS. Completely irrelevant. People who use these open architecture arrangements want flexibility to swap and change, to make investment decisions themselves. There is far far more to be lost by making poor decisions than any piffling charge. Again, I stress I wouldn't use HL, but really, get over yourselves.

I have been with HL for over 3 years with SIPP and Vantage and have no complaints about them, platform is stable, easy to use and the service they provide is exactly as expected, charges are not as cheap as some of the bucket operators but you get what you pay for, they offer plenty of research and advice if that's what you are interested in and finally the ability to place limit orders valid for 30 days is a massive time saver!

Cheap does not always mean better, far safer to place your money with a solid UK based stock broker than some place which may not be around in 2 years.

I get my 16 year old Toyota valued at £125 serviced by a mechanic in his spare time. When I buy(if) I buy a new/newish car valued in region of £12/15000 I will probably get it serviced by a 'proper' garage. In doing this I will have first considered cost/benefit. As previous comments have highlighted there is no free lunch.

All credit to HL, following my complaint about these tracker charges I have received a very nice letter back explaining the rationale. An excellent piece of customer service.

I feel happier now and am adjusting the tracker part of my portfolio so it makes sense in the context of the new fees. i.e. No tracker fund holding will have less than £5K except Emerging Markets where it will be £2.5K - so problem solved.

However, I hope they realise that they made a complete mess of this announcement and need to be more careful in the future.

Here we have the most profitable company on the stock market, whose meteoric rise over the last few years has put them into the FTSE100, telling us they need to charge £24 per year to hold a few index trackers...Ha, ha, ha !

Why the heck are people going to HL to be fleeced when they can hold index trackers at the issuing company for nothing?

I hold all my stocks and shares with a stock broker on his platform with all the trading facilities, limit orders etc for nothing. An IFA holds my UT and OEIC and rebates all his initial and annual commision, for a one off £25 fee. I do not know how he does it. I am perfectly satisfied with both of them and have no wish at all to make HL any richer than he already is.

Incidentally, I get all the HL so called research reports in my email and I find them of completely one sided and of very low standard, nothing more than sales bulletins masquerading a research. If you have any doubts on this, just look up the performance of their own funds. Second rate.

This discussion has been useful to see what platforms or brokers people use and the experience/costs. It is about time HL and others like Killik made it clear how much they receive from fund managers. In addition all transactional/dealing costs should be made clearly available. One can then decide if they wish to pay more for what may be a better service.

HL charging £1-2pm is probably the beginning for them and many others. Fund manager kickbacks will stop in a year or so and these firms who heavily relied on this commission will have to start charging the client. The worst of all will be those firms who got the kickback but did nothing for it, i.e. charged a dealing fee to buy the fund (maybe an ongoing admin fee as well) and then gave no ongoing service. How would these firms suddenly justify charging a client up to 0.75% per annum ?

It will be interesting to see in the run up to RDR the changes to come.

Very interesting comments but I have great sympathy and agreement with Ana S.

Has anybody thought of putting their next ISA with Alliance Trust or any other provider and purchase all their Trackers in that ISA. I am sure no one is going to be as outrageous as HL has been. Alliance Trust has a complete portfolio of Vanguard trackers - the cheapest. When I was setting up my SIPP I opened an account at Alliance but in the end opted for HL. I am now going to activate my AL account.

I just checked I never realised I was being charged! I was never informed and only realised when I googled "platform fees" to find out as nothing on HL website that I could find. What a bunch of B*******!

I know they never made money from my SIPP, so a fee I expected one day but not hidden away and never informed. And with my rebate pension as well although that will soon merge it's costing me a lot more than other platforms. So will look to move. I reckon they have tried hiding it on purpose so that investors would never realise

The government need to regulate the finance industry properly if people are to have confidence to save for retirement without being ripped off.